LATAM Airlines Group has filed for US Chapter 11 bankruptcy protection for its affiliates in Chile, Colombia, Ecuador, Peru and the USA. The group's units in Argentina, Brazil and Paraguay are not included in the filing. The Santiago, Chile-based airline group says it plans to "transform its business" under bankruptcy protection and has secured $900 million in additional financing from shareholders Qatar Airways and Cueto Group. Qatar Airways acquired a 10% stake in LATAM in 2016. A further 20% of the group is held by Delta Air Lines, which invested $1.9 billion in the Latin American group in September 2019. There is no mention in LATAM's 26 May statement of any additional planned investment by Delta, but the group says it would "welcome other shareholders interested in participating" in the process, "to the extent permitted by law". The Chapter 11 process will provide LATAM and its affiliates with an "opportunity to resize their operations to the new demand environment", says the group, "enabling them to emerge more agile, resilient and sustainable". The group's airline will continue operating passenger and cargo flights, "subject to demand and travel restrictions", throughout the reorganisation process. "LATAM entered the Covid-19 pandemic as a healthy and profitable airline group, yet exceptional circumstances have led to a collapse in global demand,” states LATAM chief executive Roberto Alvo. “We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option to lay the right foundation for the future of our airline group." Employees will continue to receive their salaries throughout the reorganisation process and suppliers will be paid "in a timely fashion" for goods and services delivered from 26 May onwards. The Chapter 11 process will enable LATAM to "meet its obligations while comprehensively managing its fleet and addressing its debts", most of which are held in the USA, says the group. LATAM's management team will remain in place throughout. While most of LATAM's affiliates are included in the reorganisation process, divisions in Argentina, Brazil and Paraguay are not as a result of "the nature of their debt structure and current financial status", says the group. However, these three units will "continue to operate", says LATAM. It adds that it is in discussions with the Brazilian government about "financial support" for its operations in the country.

Lufthansa Group has secured approval from the federal German government’s economic stabilisation fund, WSF, for a €9 billion ($9.8 billion) financial package. Under the agreement the WSF will contribute up to €5.7 billion to Lufthansa’s assets including €4.7 billion in equity. The measure will be supplemented by a syndicated three-year credit facility of up to €3 billion, provided by private banks and KfW – yet to be approved. It says the “silent participation” is unlimited in time and can be terminated by the company – either in whole or in part – on a quarterly basis. The remuneration will amount to 4% for 2020 and 2021, increasing gradually to 9.5% by 2027. WSF will acquire shares to build up a 20% shareholding in Lufthansa Group at a price of €2.56 per share – equating to an overall cash investment of some €300 million. It will be able to increase the shareholding further, to just over 25%, if there is a takeover of the company. If Lufthansa Group fails to remunerate the fund then an additional portion of the WSF participation can be converted into another 5% shareholding from 2024 and 2026 – although the second conversion only becomes valid if the shareholding increase from a takeover has not been exercised. Subject to Lufthansa’s fully repaying the participations and a minimum sale price of €2.56 per share, plus annual interest of 12%, the WSF is undertaking to sell its entire shareholding at the market price by 31 December 2023. Lufthansa Group says the stabilisation package still requires the final approval of its management board and supervisory board, while the measures are also subject to shareholders’ and regulatory approval.

Source: Cirium

Air Canada’s proposed acquisition of Transat AT, the parent of leisure carrier Air Transat, is to face scrutiny from European competition regulators. The European Commission is concerned that the tie-up could “significantly” reduce competition on 33 city-pairs between Canada and the 30 countries of the European Economic Area. These city-pairs comprise 29 between which both companies offer nonstop service and four between which one flies nonstop and the other flies via a hub. Preliminary market analysis, says the Commission, shows the two companies have previously competed “head-to-head” on the transatlantic routes, with Air Canada specifically developing its Air Canada Rouge division to compete with Transat AT’s low-cost and leisure services. Although WestJet has been expanding transatlantic services, and serves cities including Rome, London and Paris, the Commission says “it is unlikely” that the carrier would exert “sufficient competitive constraint” on the merged entity across the relevant city-pairs. European carriers, it adds, are also “distant” competitors, offering services on a “very small” group of routes out of their hubs. The Commission is opening an in-depth investigation into the proposed acquisition, which will take up to 90 days. It will need to make a decision by 30 September. “We will carefully assess whether the proposed transaction would negatively affect competition in these markets leading to higher prices, reduced quality or less choice for travelers flying over the Atlantic,” says competition commissioner Margrethe Vestager. “This is a challenging time, especially in markets severely impacted by the coronavirus outbreak, but a return to normal and healthy market conditions must be based on markets that remain competitive.” Air Canada and Transat AT, the regulator states, are the two largest providers of scheduled flights between Canada and the European Economic Area. It points out that tie-ups such as that proposed have “long-term structural effects” on competition which will need to be examined even during the current economic crisis. Air Canada and Transat AT chose not to submit commitments during the initial part of the investigation to address the Commission’s preliminary concerns.

Source: Cirium